Gavekal Research analyst Rohan Daswani said investors should consider buying a potential sell-off in Brazilian markets after Luiz Inacio Lula da Silva’s unexpected victory over Jair Bolsonaro. He said the market had already priced in expectations of a Bolsonaro win and tighter fiscal discipline, which could now unwind as those positions are closed. In his view, that does not change the broader case for Brazil.
Daswani said the structural reasons for staying constructive on the country remain in place. He pointed to unusually high nominal and real interest rates, Brazil’s large exposure to commodities, and its growing importance in critical mineral supply chains. He also argued that Brazil’s Congress is materially more conservative than the president, a factor he said limits the room for a major leftward shift in economic policy. According to the report, Brazil’s stock market opens at 21:00 Beijing time.
Odaily reported that Gavekal Research analyst Rohan Daswani said Brazilian markets could face a sharp sell-off at the open after Luiz Inacio Lula da Silva’s unexpected win over Jair Bolsonaro, but investors should view that weakness as a buying opportunity.
Position unwinds may pressure the market at the open
Daswani said the market had already priced in expectations of a Bolsonaro victory and stronger fiscal discipline. As those trades are unwound, Brazilian assets could come under near-term pressure.
The structural case for Brazil remains intact
He said the longer-term reasons for staying constructive on Brazil still hold, including unusually high nominal and real interest rates, the country’s significant commodity exposure, and its increasingly important role in critical mineral supply chains.
Congress seen as a constraint on a leftward policy shift
Daswani also said Brazil’s Congress is clearly more conservative than the president, which limits the scope for economic policy to swing sharply to the left.
According to the report, Brazil’s stock market opens at 21:00 Beijing time.
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